The TRADE: Trade transparency requirements
are changing dramatically under MiFID II. How
will this affect market participants?

Per Loven: There are fundamental changes in
terms of trade transparency between MiFID
as it stands today and MiFID II. MiFID -
which came into effect in 2007 - required
firms that executed trades OTC to report
them for equities and equity-related instruments. This was the first step towards trade
transparency in the OTC space, and we have
been servicing the market as a trade data
monitor (TDM) ever since. Today, our partnership with the London Stock Exchange
has seen the creation of TRADEcho, which is
the approved publication arrangement (APA)
for trade transparency under MiFID II.

TRADEcho will cover all asset classes, every
instrument in terms of pre- and post-trade
transparency in Europe.

For MiFID II, the requirements changefrom covering only equities and equity relat-ed instruments, to a much broader universe,including fixed income and derivatives.The instrument universe affected will gofrom some 7,000 instruments to somewherebetween 15 and 20 million instruments. It’shard to say at this point because we don’tknow exactly in terms of packaged dealsand derivatives contracts. It also involvesenhanced transparency on the pre-trade sideunder the systematic internaliser regime.

Banks and brokers who today run broker
crossing networks (BCNs) will under MiFID
II, to a large extent, operate as systematic
internalisers, which involves pre-quoting
requirements.

Furthermore, the hierarchy around who
has the reporting obligation in any given
scenario is defined to a detailed extent
under MiFID II. This is very different from
today, where no clear rules around this
exist, something leading to continuous over
reporting, distorting the view of real liquidity
in the market. Under MiFID II, if a trade is
executed on a venue (Regulated Market or
MTF), then the venue will report the trade to
the market. If the trade is executed against a
systematic internaliser, then the systematic
internaliser has the reporting obligation. In
other scenarios, it’s the seller’s obligation to
report the trade.

Ultimately, the main changes can be outlined as:
• Extension of instruments covered, from

“These changes will affect fixed incomemarket participants in a profound way.”The TRADE speaks with commercial director at TRADEcho, PerLoven, about how trade transparency requirements under MiFID IIdiffer from MiFID and according to asset class, and how firms canuse technology to help ease the reporting compliance burden.